The Government has launched public consultation on proposals to reform the GST rules for joint ventures on 7 April 2025. The proposals in the discussion document are largely aimed at ensuring the GST rules are fit for purpose for joint venture arrangements and minimise compliance costs.

The main proposal is to remove joint ventures from the unincorporated body rules in the Goods and Services Tax Act 1985 by default. However, the members of a joint venture could still choose to register the joint venture separately.  Other related technical and consequential changes are also considered.

Currently, individual members cannot claim input tax deductions for goods or services acquired through a joint venture if the venture itself is not GST-registered. The deadline for comments is 16 May 2025.

Introduction

The proposals include introducing a default “flow-through” mechanism and an option to treat the joint venture as a separate GST-registered entity. Submissions are due by 16 May 2025.

1.1 This discussion document considers possible reforms to the goods and services tax (GST) policy settings for joint ventures.

1.2 A joint venture is a contractual association between two or more persons, under which the parties come together for a common commercial goal. The arrangement is entered into to obtain benefits for the parties involved, typically in the form of a share of the output or revenue from the arrangement. Sharing of costs and co-ownership of property are both common features of a joint venture.

1.3 For GST purposes, a joint venture is an unincorporated body, which is treated as a separate person similar to a company.

1.4 A common practice in some industries that use joint ventures is for the members to individually account for GST on supplies made or received in the course of the venture in their own GST returns. However, draft guidance published by Inland Revenue concludes that these practices are not correct under the current rules for unincorporated bodies. This gives rise to a problem for certain types of joint ventures. Some joint ventures are unable to register for GST, so this treatment means that input tax deductions cannot be claimed.

1.5 Even when a joint venture may be able to register for GST, the members (who are often already registered for GST for their own separate activities) may prefer not to also register the joint venture for compliance cost reasons.

1.6 This discussion document seeks public views on a set of proposals to address these problems. All legislative references are to the Goods and Services Tax Act 1985 (GST Act) unless otherwise stated.

Background and problem definition 

1.7 New Zealand’s GST rules treat an unincorporated body, such as a partnership, joint venture, trust, club, or any other type of unincorporated association, as a separate person for GST purposes. Unincorporated bodies are required to register for GST if they supply or expect to supply goods or services worth more than NZD 60,000 in a 12-month period.

1.8 A draft Question We’ve Been Asked (QWBA), released by Inland Revenue in March 2023 for public consultation, concludes that when an unincorporated body is not registered for GST (which may be because it is not carrying on a taxable activity, or because its supplies are under the registration threshold), the current law does not allow members to register individually for the body’s activities and claim input tax deductions for goods and services acquired by the body.

1 1.9 This is the correct policy outcome for most unincorporated bodies. However, due to the unique nature of a joint venture this conclusion can be problematic.

1.10 When a joint venture is not carrying on a taxable activity, this conclusion means that GST on goods and services acquired by the joint venture cannot be claimed back as an input tax deduction by any person under the current law. This applies even when the goods or services are directly used for making taxable supplies by GST-registered members of the joint venture in their separate taxable activities. For instance, this issue may arise when the participants in the venture share in the output or product of the venture and each sell their share of the output or product separately (which is a common practice in both the resources and construction industries, and potentially in other industries).

1.11 Even when a joint venture is carrying on a taxable activity, requiring the joint venture to register instead of the members may in some instances increase overall compliance costs. This may be the case if the joint venture members are individually registered for GST for taxable activities that they each carry on separately, especially if some of them are also participants in many joint ventures.